Property investors in Australia can be subject to vexing restrictions on future land development that could severely impact the potential of their latest acquisitions.

In addition to the limitations imposed upon intended land development by Council-issued planning permits, other restrictive covenants also exist that can scupper the best-laid plans of property investors.

Chief amongst them are Section 173 Agreements, that function in a manner much akin to restrictive covenants, serving as a brake upon the actions of the future owners of a property.

Section 173 of the Planning & Environment Act 1987 authorizes councils to enter “Section 173 Agreements” with the owners or purchasers of land that can restrict their usage well into the future – even after the property has switched hands.

The scope of the agreements allow for both positive measures and negative restrictions, and can thus encompass prohibitions and conditions governing the usage or development of land for certain specific purposes.

An example provided by Lovegrove Smith & Cotton of the impact of a Section 173 Agreement is one requiring that any future land development be in strict accordance with the current planning permit, restricting development on the property to a 2 lot subdivision with townhouses.

It’s readily apparent Section 173 Agreements can create vexing dilemmas for investors who are unapprised of their existence in relation to recent land acquisitions, and who harbour development ambitions beyond those outlined by the limiting covenant.

Investors nonetheless have a number of options at their disposal should they find themselves the owners of land whose development potential is hemmed in by a Section 173 agreement.

If purchasers were not properly apprised of the existence of the Section 173 Agreement prior to settlement, they potentially have an action in negligence with respect to the conveyancing advisor.

Owners also have the option of applying to the council for amendment or termination of the Section 173 Agreement, on the grounds of a change in circumstances that render it unnecessary, or defects intrinsic to the Agreement itself.Pro

Councils will then make their decision after consulting with other owners or third parties whom the Agreement affects.

Should owners be dissatisfied with the decisions made by councils they can also apply for a review at VCAT within 60 days of formal notification of the decision.